Texas Securities Fraud

Texas Investor Fraud: Investment Adviser is Barred in $6.8M Offering Fraud and Investment Promoter Gets 25 Years in Prison for Stealing from Clients

Published on: September 27, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Thomas J. Caufield, an investment advisor and the owner of and a Dallas-based investment education franchise, is now barred by the Securities and Exchange Commission. The regulator recently charged Caufield with investor fraud, accusing him of lying to over 30 investors in a $6.8M offering fraud.

According to the SEC, from at least early 2013 through December 2017, Caufield, who is from Colleyville, Texas, promised investors substantial returns if they invested in the high-yield promissory notes for what he touted was a profitable franchise. The investment advisor claimed that their money would go toward acquiring and running a franchise that would provide education programs. Instead, Caufield allegedly used a substantial portion of the over $6M in investor funds pay back earlier investors and take care of overdue franchise fees.

The Texas investment advisor is accused of providing materials with false information and making false pitches to prospective investors, including the franchise’s students and clients of DAT Capital Advisors, which was the investment adviser that Caufield owned and used to be registered in the state. Caufield allegedly did not disclose that the franchise was in poor financial health.

Another Texas-Based Wells Fargo Broker is Barred by FINRA

Published on: September 12, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has barred Wells Fargo (WFC) broker Edward O. Daniel, after he failed to participate in a probe into allegations that he made unsuitable investments for one client. Daniel, a Texas-based broker, was with Wells Fargo Advisers for seven years before he stepped down in September 2016. He was a longtime broker of 41 years.

Soon after Daniel resignation two years ago, Wells Fargo disclosed that a customer had filed an arbitration complaint accusing him of making unsuitable investments over a several-year period. The dispute was resolved for $225K. His BrokerCheck record documents that Daniel has been named in eight disclosures, all involving complaints by customers.

Now, FINRA is barring him because he would not cooperate in the self-regulatory authority’s investigation into the unsuitable investment allegations.

Investors in UDF IV REIT Want Texas Federal Judge to Approve $13.5M Ponzi Fraud Settlement

Published on: August 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Investors who placed their funds in the Texas-based United Development Funding IV real estate investment trust are asking a federal judge to approve a $13.5M REIT fraud settlement they’d reached with the company over the allegations that it had been run like a Ponzi-like scam and concealed this. The plaintiffs contend that UDV IV and its affiliates not only made false statements but also they did not disclose material facts involving business and operations.

They brought their REIT fraud case against the UDF companies three years ago, accusing the defendants of using investors’ funds from newer offering to pay investors who had gotten involved in earlier offerings. The investors, who want class certification, alleged that disclosures they were offered were misleading and lending practices lacked transparency.

Both sides eventually arrived at the $13.5M settlement—$10.5M in cash and another $3M once the REIT hits its $75M cash flow target in two years. This deal is separate from a settlement the plaintiffs reached with UDF accountants, as well as those that underwrote and sold the allegedly fraudulent offerings.

Texas Megachurch Pastor and Financial Planner Are Accused of Senior Investor Fraud

Published on: April 2, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed senior investor fraud-related charges against Houston pastor Kirbyjon Caldwell of the Windsor Village United Methodist Church and financial planner Gregory Alan Smith. The regulator is accusing them of defrauding older investors of over $1M through the sale of pre-Revolutionary Chinese bond interests.

Smith runs the Smith Financial Group. The SEC permanently barred him from associating with brokerage-firms in 2010 after he was accused of misappropriating investor money. Caldwell is the senior pastor at reportedly one of the biggest Protestant churches in the US.

According to the regulator, in 2013 and 2014, the two men solicited older investors in an attempt to sell them bonds that they claimed were valued at billions of dollars when, in truth, the bonds were “collectible memorabilia” that lacked any “meaningful investment value.”

Texas Securities Cases: Austin Investment Adviser to Pay Over $715K to Settle Cherry Picking Allegations and Dallas-Based Oil and Gas Company is Accused of $95OK Investor Fraud

Published on: March 9, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Valor Capital Asset Management LLC and its owner, Texas-based investment adviser Robert Mark Magee, have settled US Securities and Exchange Commission charges accusing them of defrauding investors by engaging in cherry picking. As part of the settlement, Magee is banned from the securities industry and will pay over $715K.

The SEC contends that while trading securities in the firm’s omnibus account, Magee would wait to allocate the trades until after watching their performances throughout the day. He would then allocate a disproportionate amount of the more profitable trades to his accounts while sending the trades that were not profitable to his clients. This allowed him to profit at cost to clients. The SEC believes that his ill-gotten gains from cherry picking was over $505K.

For example, notes the SEC, the way in which Magee traded and allocated El Pollo Loco Holdings is “representative” of how he allegedly engaged in cherry picking. For five trading days in a row, trades in LOCO that were profitable went to his own account. When the price went down on the sixth day, he allocated the shares to six Valor client accounts instead of selling the shares at a loss.

Three Companies and Their Principals Accused of $11.7M Texas Oil and Gas Offering Fraud

Published on: February 28, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed civil charges against Ameratex Energy, Inc., Lewis Oil Company, Lewis Oil Corp., their CEO Thomas Lewis, and ex-Ameratex President William Fort over their alleged involvement in an $11.7M Texas oil and gas offering fraud. The companies are based in Plano, Texas.

According to the regulator, the companies and the two men sold unregistered securities to more than 150 investors while making misleading statements about how the proceeds would be used. They also allegedly provided false information regarding prospect wells and sales commissions, as well as provided “false guarantees” regarding the lending out and mingling of funds.

The securities that they offered were not registered with the SEC. The individuals selling the investments were not licensed brokers or associated with brokers that were registered.

Texas Securities Cases: Two Dallas Men Ordered to Halt $4M Oil and Gas Offering Amidst Fraud Allegations, DavorCoin is Barred from Offering investments, and Austin Cryptocurrency Investment Firm is Told to Stops Securities Sales

Published on: February 17, 2018 | by Shepherd Smith Edwards & Kantas, LLP

State Regulator Orders Cessation of $4M Oil and Gas Offering

In an Emergency Cease and Desist Order, the Texas Securities Commissioner has ordered Parker R. Hallam and Jason A. Gilbert, two Dallas residents, to stop their efforts to raise $4.4M in an oil and gas offering. The two men are accused of fraud allegations.

Hallam and Gilbert have been offering investors interest in a well project that would be based in Kansas. They reportedly intend to take $1M of investor funds as a management fee payment to SourceRock Energy Phoenix Prospect LP, which is the company that they do business as. Meantime, the rest of the funds would go toward leasing and building the well field. The two men have not, however, told investors that drilling costs are estimated to be at just around $750K.

Hallam also is accused of failing to tell investors that in 2016, the US Securities and Exchange Commission sued him and others over their alleged involvement in an $80M oil and gas fraud. Also, according to the Texas securities regulator, Gilbert failed to disclose that the Internal Revenue Service previously filed $548K in tax liens against him. The government agency also filed liens against Hallam, who has yet to pay nearly $143K of what he owes.

Texas Securities Cases: Ex-LPL Financial Adviser is Suspended for Charging Unreasonable Fees and Commissions, State Regulator Enters Cease and Desist Order Against R2B Coin, and Former Pharr Bank Worker Pleads Guilty to $1M Theft Involving Elderly Customers

Published on: January 30, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Beaumont, TX Investment Adviser is Suspended for 90 Days
In a Disciplinary Order, the Texas State Securities Board suspended former LPL Financial LLC (LPLA) investment adviser Jason N. Anderson for 90 days. The state contends that while registered with that firm, Anderson touted an active-trading program to clients that charged them unreasonable fees, which included commissions to Anderson, as well as trading costs.

For example, one client paid costs that were approximately 30% of “the value of the average equity securities” in the client’s account. The Texas regulator said that the trading program would have had to make “extraordinary returns” for investors to “offset” such fees or even, in some cases, allow them to merely “break-even.”

The order called the commissions and trading costs “inequitable practices” that violated the Texas Securities Act. The state accused Anderson of not having reasonable grounds for believing that the trading program would be appropriate for these clients.

AriseBank in Dallas is Accused of Alleged $600M ICO Offering Fraud

Published on: January 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The SEC has put a stop to Dallas-based AriseBank’s initial coin offering. The regulator contends that AriseBank, which touts itself as the first “decentralized bank” in the world, and its principals are committing Texas financial fraud, and they’ve targeted retail investors, including Texas investors, in an effort to raise hundreds of millions of dollars.

Now, the Commission has a court order to stop the sale of AriseCoin cryptocurrency, which it says are unregistered investments. The regulator called the ICO an “illegal offering” of said securities and it accused the company of engaging in an “outright” scam.

AriseBank reportedly sought to raise $1B during its ICO, which began in late December and was scheduled to end later month. Investors were supposed to receive their distributions on February 10.

BitConnect Shutters Its Lending and Exchange Operation, Leaving Texas Investors With No Place to Trade Their BCC Currency

Published on: January 17, 2018 | by Shepherd Smith Edwards & Kantas, LLP

BitConnect, an investment lending platform for Bitcoin, has suddenly announced that it is shuttering its lending and exchange operation immediately. The company said that its exchange platform would shut down in five days. In a post on its site, BitConnect said that moving forward, it would operate for “wallet service, news and educational purposes.”

The announcement caused the price of BitConnect Coins (BCC), which is its Bitcoin currency, to plunge by over 90%–from over $400/coin to about $17.25/coin. Now, its investors are left wondering what to do with their coins.

Some site users are claiming that even though the exchange for the BCCs was supposed to stay open throughout the week, they have been unable to process trades because they cannot access the exchange. CoinDesk reports that one investor sent an email, claiming over $400K in losses because of this.